KKR-Backed Power Company Files for Bankruptcy After Tapping Stimulus Funds

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guru

https://www.wsj.com/articles/kkr-ba...36?redirect=amp#click=https://t.co/6UZN7ffDin
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Longview Power, which owns a plant in West Virginia, gets taxpayer money to help ease a debt restructuring

Becky Yerak April 14, 2020

Longview Power LLC, a private-equity-backed power generator, filed for bankruptcy Tuesday with a prepacked restructuring proposal that includes help from the government stimulus package passed in the wake of the coronavirus pandemic.

Longview, in which private-equity giant KKR & Co. owns a stake, was approved for a loan from the taxpayer-funded Small Business Administration’s paycheck protection program Friday and it expects to use the proceeds to fund payroll, according to papers filed in U.S. Bankruptcy Court in Wilmington,...
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https://www.washingtonpost.com/
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Hedge Fund Managers Claiming Bailouts as Small Businesses
By Katherine Burton and Joshua Fineman | Bloomberg

Free money.That’s the enticing prospect hedge funds and other trading firms are pondering after realizing they too might be able to participate in a historic U.S. stimulus package to keep small businesses alive through the coronavirus pandemic.Since early April, law firms have hosted Webinars and sent out alerts, and accounting firms have reached out to clients, all with the goal of explaining how they might be able to tap into the Paycheck Protection Program. The $349 billion package administered by the Small Business Administration provides loans to cover payroll, rent and utilities for up to eight weeks. The loans can convert to grants if recipients retain or rehire their workers.Some hedge funds already have applied, filling out forms to show they have fewer than 500 employees and certifying the “current economic uncertainty makes this loan request necessary to support the ongoing operations.”
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guru said:
https://www.washingtonpost.com/
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Hedge Fund Managers Claiming Bailouts as Small Businesses
By Katherine Burton and Joshua Fineman | Bloomberg

Free money.That’s the enticing prospect hedge funds and other trading firms are pondering after realizing they too might be able to participate in a historic U.S. stimulus package to keep small businesses alive through the coronavirus pandemic.Since early April, law firms have hosted Webinars and sent out alerts, and accounting firms have reached out to clients, all with the goal of explaining how they might be able to tap into the Paycheck Protection Program. The $349 billion package administered by the Small Business Administration provides loans to cover payroll, rent and utilities for up to eight weeks. The loans can convert to grants if recipients retain or rehire their workers.Some hedge funds already have applied, filling out forms to show they have fewer than 500 employees and certifying the “current economic uncertainty makes this loan request necessary to support the ongoing operations.”
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PPP doesn't apply to employees making less than $100K, so between the fact that there are very few people working at most hedge funds and vanishingly few making sub $100K, they're not making out like bandits from this program. Add the general PITA of applying, and the limitations on what the loan can cover, there's no way any hedge funds are actually applying for this.
What is actually being confused here is the hedge fund and companies the hedge fund is invested in. There was a wrinkle in the control provisions of the law that meant that basically if you had venture or PE money your company was ineligible for the program, because you had to add up all the employees of all the companies of your investors and count those employees as your employees for the 500 employee limit. As someone who was once in that position I can understand how much that would suck for the 25 person company who had an A round. In any event, even if you disagree, it's a very different story than what is being pitched; of fat cat hedge fund managers taking out loans to cover their salaries.

BTW, everyone does understand that the PE firm generally loses all their ownership under a bankruptcy, so they're not benefiting in the Longview scenario at all? The only question under bankruptcy is if it reorganizes under chap 11 and keeps the jobs or liquidates under chap 7 and loses them. Seems the program is working exactly as intended in this case to me, if the intent was to keep jobs. If anyone is "taking advantage" of anything here it would be the debt holders since they now own the company, not the PE firm.
 
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